Many Data Released But Market Attention Focused on U.S. Congress

December 5, 2017

Purchasing manager surveys are among a slew of economic statistics reported around the world today. A highly partisan U.S. Republican tax bill grinded further toward approval, and so did the Senate confirmation process of Jay Powell as the next Federal Reserve Chairman. There were two central bank meetings. The National Bank of Poland and Reserve Bank of Australia left their key interest rates unchanged. Coincidentally, both are at 1.5%. A possible U.S. federal government shutdown on Friday remains possible.

The dollar rose overnight by 0.5% against the peso, 0.4% versus the yen, 0.3% vis-a-vis the kiwi and euro, and 0.2% relative to sterling and the Swiss franc. The loonie and yuan are steady.

Stocks in the Pacific Rim fell 0.9% in Hong Kong, 0.8% in Taiwan, 0.4% in Japan, and 0.3% in New Zealand. Share prices have dipped 0.1% in France and the U.K. but edged up 0.1% in Germany and the United States.

The main financial market development has been lower metal prices. Gold dropped 0.9% to $1,266 per ounce. WTI oil is 0.1% firmer.

Ten-year German bund and British gilt yields are down two basis points, while the 10-year Japanese JGB and U.S. Treasury yields edged up a basis point.

Euro area retail sales volume tanked 1.1% in October, more than reversing September’s increase and leaving sales just 0.4% greater than their year-earlier level. There was a monthly drop surpassing 1.0% in Germany, France and Spain.

The U.S. goods and services trade deficit widened 9% on month in October to a 9-month high of $48.7 billion, exceeding analyst forecasts. The bilateral imbalance with Japan leaped 33% on month.

Canada’s trade deficit more than halved to C$ 1.474 billion in October from C$ 3.364 billion as exports jumped 2.7% while imports declined 1.6%.

The U.S. non-manufacturing purchasing managers index, which is dominated by services, retreated to a 3-month low of 57.4 in November from 60.1 the month before. The index for new business dropped by 4.1 points.

Euroland’s composite PMI of 57.5 in November was 1.5 points higher than in October and at a 79-month peak. The levels in October-November suggest GDP growth this quarter is running at about 0.8%. Euroland’s services PMI rose 1.2 points to a 6-month high of 56.2.

Among reporting members of the common European currency area, composite PMI readings in November ranged from a 2-month high of 55.2 in Spain to a 78-month high of 60.3 in France, and service-sector PMI scores ranged from a 10-month low in Spain of 54.4 (reflecting Catalonian political strains with the central government) to a 78-month high in France of 60.3. The data suggest 4Q GDP growth of around 0.9% in Germany, 0.7% in France, and 0.4-0.5% in Italy, all non-annualized.

Japan’s services and composite PMI readings in November were at 2-month lows of 51.2 and 52.2. Such signals mildly positive economic growth but was accompanied by higher inflation.

Australia’s Performance of Services index rose to a 3-month high of 51.7.

China’s composite and service-sector PMIs in November were both above the 50 line of separation between expansion and contraction. At 51.6 and 51.9, they were the best readings since August.

The British services PMI of 53.8 in November was well below analyst expectations and down from 55.6 in October. The index for prices charged was the second most in two decades.

November non-oil PMIs of 50.7 in Egypt and 57.5 in Saudi Arabia represent 27-month highs. In the United Arab Emirates, the non-oil PMI rose 1.1 to 57.0, a 3-month high, while Lebanon’s private PMI of 46.2 was 0.4 points closer to 50, implying a slower rate of contraction last month.

Hong Kong’s private PMI rose 0.4 points as well to a 2-month high of 50.7. But South Africa’s PMI reading fell 0.8 points to a 2-month low and contractionary 48.8.

Singapore’s private PMI improved to a roughly 3-1/2 year high of 55.4, suggesting GDP growth of more than 5.0%.

Brazil’s services and composite PMIs last month were at 9- and 5-month lows of 46.9 and 48.9.

Australia posted a current account deficit of A$ 9.1 billion in the third quarter, some A$ 600 million less than in 2Q.

Australian retail sales grew 0.5% in October, faster than had been forecast and 1.8% above the year-earlier level.

On-year South African GDP slowed to 0.8% last quarter from 1.3% in 2Q. Hungarian GDP grew 4.1% in the year to 3Q when adjusted for calendar day variations and seasonal distortions.

British same-store sales were 0.6% greater in November than a year earlier, but new car sales posted a 12-month 11.2% rate of drop.

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